Government Contracts Monitor

OMB Proposes New Guidance Concerning Grants and Cooperative Agreements

February 20, 2013

By: Eric Whytsell

On February 1, 2013, the Office of Management and Budget (OMB) took the latest step in the Obama administration’s ongoing efforts to reform federal policies relating to grants and cooperative agreements: Proposed Guidance - “Reform of Federal Policies Relating to Grants and Cooperative Agreements; Cost Principles and Administrative Requirements (Including Single Audit Act).”  78 Fed. Reg. 7282  (Feb. 1, 2013).  This new proposed guidance follows the February 28, 2012 Advance Notice of Proposed Guidance (ANPG) published in the Federal Register and reflects responses to that notice from across the spectrum of stakeholders in the grants community.

The proposed guidance is intended to consolidate guidance from all or part of eight OMB Circulars (A-21, A-87, A-110, A-122, A-89, A-102, A-133; and A-50) and, pending further review, the Cost Principles for Hospitals at 45 C.F.R. Part 74, Appendix E into a streamlined and consolidated format that will be integrated into Title 2 of the Code of Federal Regulations.  Like the existing guidance, “the new guidance would be applicable to grants and cooperative agreements that involve state, local, and tribal governments as well as institutions of higher education, and nonprofit organizations.” 78 Fed. Reg. at 7283.  In certain circumstances, parts of it may also apply to for-profit entities in limited circumstances.

The consolidated guidance seeks to eliminate duplicative language and clarify where policy is – and is not – substantively different across types of entities. Thus, the proposed guidance clearly delineates sections and portions of sections by the type of entity to which they apply. “For Federal agencies, auditors, and pass-through entities that engage with multiple types of entities in the course of managing grants, this consolidation is intended to clarify where policies are uniform across entities or differ, protecting variances in policy where required by the unique nature of each type of entity.”  Id.

In addition to harmonizing and streamlining all OMB guidance on grants into one easier to understand and apply document, the new guidance continues the dialog concerning a number of substantive reform proposals that began with the February 2012 ANPG.  The proposed guidance outlines the ideas set forth in the ANPG, the broad themes identified in the comments received, and the resulting reforms OMB is now proposing, as well as particularly popular reform ideas generated by commenters and considered by OMB.  The guidance groups the reform proposals under discussion into four main
sections:

Section A: Reforms to Administrative Requirements (the government-wide Common    Rule implementing Circular A–102; Circular A–110; and Circular A–89);

Section B: Reforms to Cost Principles (Circulars A–21, A–87, and A–122);

Section C: Reforms to Audit Requirements (Circulars A–133 and A–50); and

Section D: Additional Suggestions Outside of the Guidance Reform.

According to OMB Controller, Danny Werfel, the substantive reform ideas contained in the proposed guidance include:

• Simplifying the reporting requirements that grantees must adhere to in justifying salaries and wages charged to grants;
• Ensuring that Federal agencies better review financial risk posed by applicants and merits of an application before providing a grant;
• Providing guidance to ensure robust oversight of sub-recipients;
• Focusing more audit resources on preventing waste, fraud, and abuse; and
• Holding agencies accountable for getting results and addressing weaknesses among grant recipients.

OMB hopes to receive further broad public feedback on these issues in response to this proposed guidance.  Comments received in response to the proposal will be used to further refine the reforms discussed prior to the issuance of new guidance. To be assured of consideration, comments must be received by OMB electronically through www.regulations.gov no later than midnight Eastern Standard Time (E.S.T.) on May 2, 2013.

 

Eric Whytsell is the attorney responsible for the content of this article.